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Maryland Senate approves raising income taxes

Targets earners of $100,000 and up to stave off $400M in spending cuts

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ANNAPOLIS — The Senate gave preliminary approval Monday to income tax increases that Democrats say will prevent more than $400 million in spending reductions and reduce the future gap between the state's revenues and expenses.

The tax increases would be calculated according to residents' income and marital status. A family of four making more than $175,000 would pay at least $254 more in income taxes.

The General Assembly opened its special session Monday with fast-moving hearings and debate on a revenue package that would raise income tax rates on single filers making more than $100,000 a year and couples making more than $150,000 in an effort to add revenues and balance the state's $35.5 billion budget.

The two-bill package would also shift more than $130 million in teacher pension costs to local jurisdictions and reverse more than $400 million in cuts slated to go into effect after lawmakers did not pass a revenue package during the regular session, which ended last month.

The Senate is expected to give final approval to the bills Tuesday morning, leading to a House debate that is expected to last most of the day and possibly into Wednesday.

Republicans decried the hikes as harmful to residents facing tough economic times, but Democrats insisted more revenues are needed to avoid painful cuts to education, health and safety programs.

"We're here making all the tough decisions to balance the budget to try and keep the priority programs in line," said House Speaker Michael E. Busch, Anne Arundel Democrat. "We're not trying to come up with fictitious cuts or fictitious revenues. The whole idea that we're here in a special session is a very serious and responsible undertaking."

The proposed tax increase affects taxes for the top 16 percent of earners. It also decreases the value of their personal exemptions, bringing the state an additional $247 million next year.

In all, the package would cut more than $300 million from the budget proposed in January by Democratic Gov. Martin O'Malley, but would increase spending by more than $900 million over last year's approved spending plan.

The Senate Budget and Taxation Committee quickly approved both revenue bills after a near-two-hour hearing. It also rejected a bill from Senate Minority Leader E.J. Pipkin, Cecil Republican, that would have kept state spending level with last year's $34.6 billion budget.

Testimony at the hearing consisted largely of county leaders, school officials and health advocates praising the bills, from which they stand to receive significant additional aid.

Many county officials criticized the pension shift, which they said will only make things harder for local governments that have already had to slash expenses and lay off employees.

"We just don't have the tax base to come up with that kind of money," said Washington County Commissioner John F. Barr, a Republican. "Please keep in mind that we have to make tough decisions, too."

The Senate refused all amendments to the bills along mostly party lines, setting up a final chamber vote Tuesday morning.

The House Appropriations and Ways and Means committees heard testimony Monday on the bills and are expected to pass them Tuesday after they receive Senate approval.

The bills would then move to the House floor where Republicans are expected to propose many of their own amendments.

"We may not have the votes but we represent hundreds of thousands, if not millions, of Marylanders who think they are paying enough taxes and they want some restraint in government," said House Minority Leader Anthony J. O'Donnell, Calvert Republican.

Democratic leaders hope to adjourn no later than Wednesday from the special session and said they are unlikely to consider any legislation beyond the two revenue bills and a bond bill to provide $15 million for school construction.

The bond bill already passed during the regular session but must be reapproved because it was passed before the budget, thus may have violated state law.

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